- On Monday, multiple headwinds pushed EUR/USD down to 1.0730.
- French President Emmanuel Macron called for early elections, raising political uncertainty and sending the euro plummeting.
- Strong U.S. labor market data has eased expectations of a Fed rate cut, making the U.S. dollar more attractive.
EUR/USD fell to 1.0730 in Monday's New York session. The major currency pairs weakened as political uncertainty in the eurozone weighed on the euro after French President Emmanuel Macron called for early elections. Macron's surprise move on Sunday evening came after exit polls showed Marine Le Pen's far-right National Rally (RN) party, led by Jordan Bardella, won 32-33% of the seats in the European Parliament elections, more than double the number of votes received by Macron's centrist party.
“I have faith in our democracy, in the right of sovereign people to have a say. I have heard your messages, your concerns, and I am not going to go unanswered,” Macron said after the dramatic election announcement, The Guardian reported.But if Macron's party suffers more losses than exit polls predicted, it could add to uncertainty over the euro's outlook.
On the monetary policy front, Joachim Nagel, a European Central Bank policymaker and president of the German Bundesbank, warned that the inflation outlook is stubbornly tenuous, especially in the services sector, as wage growth remains robust. Concerns that inflation may become entrenched suggest a slower policy easing campaign.
Also speaking at the European session, ECB policymaker and Slovak central bank governor Peter Kasimir said the central bank should not rush to make further rate cuts because that could destabilize the deinflation progress, but Kasimir remains confident the ECB is on track to meet its goals.
European Central Bank (ECB) President Christine Lagarde, speaking at a monetary policy press conference after cutting the central bank's deposit rate by 25 basis points (bps) to 3.75%, has already said that the ECB is not committed to a specific interest rate path and will remain data-dependent as inflation is likely to remain volatile in the coming months.
Daily Digest Market Trends: EUR/USD Falls Ahead of US CPI and Fed Policy Decision
- EUR/USD fell to 1.0730 on a weaker euro due to political uncertainty and a stronger US Dollar (USD) as positive United States (US) labor market data dented market expectations that the Federal Reserve (Fed) would begin to cut interest rates from current levels at its September meeting. The US Dollar Index (DXY), which tracks the value of the US Dollar against six major currencies, recovered to a near four-week high of around 105.30.
- According to the CME FedWatch tool, pricing data for 30-day federal funds rate futures indicates there is a 47% chance that September rates will be lower than current levels, down from 59.6% a week ago.
- The US Non-Farm Payrolls (NFP) report for May released on Friday showed 272,000 new jobs, beating the 185,000 expected and the 165,000 previously reported. Stronger-than-expected labor demand may buy Fed policymakers more time to continue maintaining their current interest rate framework.
- Average hourly earnings data, a measure of wage inflation that drives household spending, came in above expectations. The annual wage inflation measure accelerated to 4.1% in May from the consensus forecast of 3.9% and 4.0% in April. Month-on-month, the wage inflation measure rose sharply to 0.4% from the 0.3% forecast and the previously reported 0.2%.
- Meanwhile, investors' attention has shifted to the US Consumer Price Index (CPI) data for May and the Federal Reserve's monetary policy decision scheduled for Wednesday. With inflation looking tough in the final stretch to get back to the desired 2%, the Fed is widely expected to keep interest rates steady in the 5.25%-5.50% range with a hawkish outlook.
Technical reasons why: EUR/USD stabilizes below the 200-DEMA
EUR/USD fell back inside a symmetrical triangle formation on the daily chart after failing to sustain the breakout move. This suggests that the move was false and the overall trend has turned bearish. The major pair is expected to find support near the upward trendline of the above chart pattern plotted from October 3, 2023, from the lows of 1.0448 to around 1.0636.
The long-term outlook for the currency pair also turned negative as it fell below the 200-day exponential moving average (EMA) which is trading around 1.0800.
The 14-period Relative Strength Index (RSI) has plummeted to 40.00. A decisive drop below this level would trigger bearish momentum.
Today's EUR/USD Price
Today's Euro Price
The table below shows the percentage change of the Euro (EUR) against the major listed currencies today: The Euro was strongest against the British Pound.
| EUR | USD | GBP | JPY | CAD | Australian Dollar | NZD | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| EUR | -0.23% | -0.00% | -0.20% | -0.08% | -0.31% | -0.26% | -0.30% | |
| USD | 0.23% | 0.14% | 0.02% | 0.14% | -0.10% | -0.04% | -0.08% | |
| GBP | 0.00% | -0.14% | -0.08% | -0.08% | -0.31% | -0.26% | -0.31% | |
| JPY | 0.20% | -0.02% | 0.08% | 0.13% | -0.20% | -0.16% | -0.05% | |
| CAD | 0.08% | -0.14% | 0.08% | -0.13% | -0.21% | -0.18% | -0.23% | |
| Australian Dollar | 0.31% | 0.10% | 0.31% | 0.20% | 0.21% | 0.05% | 0.00% | |
| NZD | 0.26% | 0.04% | 0.26% | 0.16% | 0.18% | -0.05% | -0.05% | |
| Swiss franc | 0.30% | 0.08% | 0.31% | 0.05% | 0.23% | -0.01% | 0.05% |
The heat map displays the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Euros from the left column and move along the horizontal line to US Dollars, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Economic indicators
Federal Reserve Interest Rate Decisions
The Federal Reserve Board (FRB) deliberates monetary policy and decides on interest rates at eight scheduled meetings per year. The Fed has two mandates: to keep inflation at 2% and to maintain full employment. Its primary means of achieving this is by setting interest rates, both at the rate at which it lends to banks and at the rate at which banks lend to each other. If it decides to raise interest rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it decides to lower interest rates, the USD tends to weaken as capital flows out to countries that offer higher returns. If interest rates are left unchanged, attention is focused on the tone of the Federal Open Market Committee (FOMC) statement, whether it is hawkish (anticipating future interest rate increases) or dovish (anticipating future interest rate decreases).
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Next release: Wednesday, June 12, 2024 18:00
frequency: Irregular
consensus: 5.5%
previous: 5.5%
sauce: Federal Reserve
